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Liars and clunkheads fail budget test

There are two possible explanations for how an opposition presenting themselves as an alternative government could end up with an $11 billion hole in election commitment costing. One is that they are liars, the other is that they are clunkheads.

There are two possible explanations for how an opposition presenting itself as an alternative government could end up with an $11 billion hole in the cost of its election commitments.

One is that they are liars, the other is that they are clunkheads. Actually, there is a third explanation: they are liars and clunkheads.

But whatever the combination, they are not fit to govern.

Going back to the federal election in 1987, the cost of election promises has always been hotly disputed.

Labor’s chance of winning the 2004 election, for example, was derailed by AMA claims that its Medicare Gold policy would cost $2.9 billion more than it said.

But what has occurred in Canberra this week is in another sphere altogether.

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Treasury and the Department of Finance, when finally given the chance to scrutinise the Coalition’s policies, have not just found huge discrepancies in the costings of individual policies, but what can only be described as a systematic exercise in creative accounting.

The picture that emerges from the econocrats’ report is that the opposition very purposely created a dodgy set of numbers which were never expected to withstand any scrutiny and would require the intervention of the Australian Securities and Investments Commission if it was a company.

The opposition simply hoped it could bluff its way into office by refusing to allow the figures to be scrutinised before polling day.

But what is more extraordinary is that now, having been caught out, Tony Abbott , Joe Hockey and Andrew Robb are continuing to try to bluff their way through, suggesting there is nothing more than a gentlemanly difference of opinion between them and the bureaucracy.

The brazenness of the three men only becomes really clear when they claim the bureaucrats’ document actually proves the budget would be $7 billion better off under the Coalition.

There is no other term for any of this except “complete bullshit", to use one of Abbott’s favourite terms.

Let’s just go through some of the numbers.

For a start, don’t believe this idea that the black hole lies somewhere between $7 billion and $11 billion.

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The miscosting figure is $10.6 billion. That is, the Coalition said it would take $11.5 billion off the budget bottom line over four years. Treasury has demolished all but $863 million of those savings. That is, the figures were more than 90 per cent wrong.

The idea that the black hole may “only" be $7 billion comes from Treasury bending over backwards to be polite to the Coalition and including a figure of net savings of $4.5 billion before it gets into the vexed issue of $3.3 billion of spending promises made out of a series of so-called capital funds.

The opposition pledged to spend this capital fund money either without knowing this would have a bottom-line effect on the budget, or deliberately lying about it.

When it was caught out, it claimed it could simply cut back other spending from the funds. But it wouldn’t specify what it would cut back, since it didn’t know what had already been committed.

So it is now simply asserting it will be able to find the $3.3 billion.

Then there were the holes in individual policies: $1.15 billion in alleged pharmaceutical benefits scheme savings, for starters, which could only be explained by the Coalition misreading a 10-year cost forecast by the accountants PricewaterhouseCoopers as a four-year forecast.

(Oh, and the government had already included the four-year savings in the budget anyway.)

There was the $956 million hole in the Coalition’s employment participation policy, and the $235 million blowout in the education tax refund.

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Of course the cost of the paid parental leave scheme (already set to cost $8.8 billion) is forecast to blow out by another $500 million, and there was a $627 million blowout in “all other recostings".

But of most concern is the debate about the “conservative bias allowance adjustment".

The Coalition is claiming savings of $2.5 billion from this adjustment, which comes from changing the ­basis on which the budget contingency reserve is calculated.

This reserve is the allowance for cost overruns during the four-year life of government budget-making.

It is set now at 1 per cent of the budget for the first two budget years and 2 per cent for the second two of the four budget years in each budget document.

The Coalition said it would reduce this to 0.75 per cent and 1 per cent in the budget out years, “saving" $2.5 billion in the process.

The Coalition argues both sides of politics had fiddled with this number in government. This is true.

But under the Charter of Budget Honesty, the secretaries of Treasury and Finance are legally obliged “to certify that the estimates of the fiscal outlook reflect the best professional judgement of the departments", including the conservative bias allowance.

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Ken Henry and David Tune did this in the pre-election fiscal outlook just last month. This left them no option but to reject the Coalition’s assertion of what it would do if it got into government.

It would in effect mean rejecting their own professional judgement.

It also means that Treasury and Finance’s advice, if the Coalition gets into office, is that it should not tamper with the reserve.

But the Coalition’s response to this is to say, “We can do whatever we like if we are in government."

That would be fine – after all, it is governments that put their names to budgets, not bureaucrats – if it wasn’t for the fact that the Coalition has just demonstrated it is quite prepared to cook the books.

This exercise has given us an insight into how happily the Coalition would ignore the advice of Treasury and Finance to produce a rubbery budget which would inevitably blow out further down the track, meaning a whole new round of spending cuts or broken promises.

If you had to choose who to believe between bureaucrats having to deliver bad news to people who might be their bosses in a week’s time and politicians desperate to cover up their stuff-ups, it should be an easy choice.

No wonder Andrew Wilkie was dubious about his offer of $1 billion for a Tasmanian hospital.

Parliament’s uncommitted independents have a lot to weigh up. But you’d hope $10.6 billion would weigh very heavily indeed.

Laura Tingle writes on News specialising in Politics, Policy, Economy. Based in our Canberra newsroom, Laura has over 30 years experience as a reporter covering markets, economics and politics. Laura has won two Walkley awards and the Paul Lyneham award for Excellence in Press Gallery Journalism. She has been highly commended by the Walkley judges for investigative reporting. Connect with Laura on Facebook and Twitter.

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